In foreclosure-filled regions around the country, including Southern California, Southern Florida, Phoenix and Las Vegas, bidding wars on bank owned properties are creating headaches for first time home buyers.
These houses, mainly found in affordable neighborhoods for young families and first time buyers, are listed at significantly lower prices than what they sold for only a few years ago.?? Because of these bargain prices, investors are snapping up these properties, frustrating traditional buyers who can't afford to pay in cash like the investors.
Banks prefer the investors not only because they can pay in cash, but also because they often buy more than one home at a time.?? This keeps the bank away from the headaches of waiting for a traditional buyer to qualify for a loan, as well as helps them unload their foreclosures more quickly.
These bidding wars put traditional buyers at a disadvantage because the outcome is often a higher price for the home than the appraised value.?? Investors with cash don't need the appraisal to secure the loan.?? This results in higher prices all around with frustrated first time buyers bidding and bidding but coming home empty handed.
According to an article on MSNBC.com, this environment is "strikingly similar" to that seen at the height of the real estate bubble, and won't correct itself until the market is driven by people planning to live in the home, rather than investors with cash to burn.
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